UK game developers 'turning to iPhones'

The iPhone game, Angry Birds, has sold more than 6 million copies

There has been a surge of UK developers making games for Apple's iPhone, according to a report by the trade association Tiga.

The organisation said it had also found the majority now had - or intended to - put in-game ads into their titles.

Analysts describe the spate of mobile games as "something of a gold rush".

However, Tiga's report also highlighted that hundreds of jobs were being lost in the industry as developers were lured overseas by lucrative tax breaks.

The rise in the creation of mobile games by independent developers appears to be directly tied in to the success of Apple's iPhone and, more significantly, the popularity of game applications sold on its App Store.

More than half of the self-publishing UK game developers surveyed by Tiga were creating games for the Apple handset.

The current publishing model sees a 70-30 revenue split in favour of developers, with some titles - such as Angry Birds by Finish developer Rovio - selling in excess of 6 million copies in the last six months.

With a price of £0.59 on the App Store, Angry Birds is set to make Rovio over £3.5m.

The arrangement with Apple is very different from the traditional sales model for console titles, which must be sold in shops or online stores, and incur wholesale and higher distribution costs.

It is therefore small wonder there has been a four-fold increase in the number of developers focusing on direct sales to the consumer.

'Very exciting'

Chris Byatte, who runs the independent British publisher, Chillingo, told the BBC that it was a "golden era" for games development.

"The carriers have been taken out of the equation by Apple, who make it really simple for people to get their titles into its App Store," he said.

"Now, a bedroom programmer can get a number-one hit, competing against the likes to Electronic Arts. It's very exciting," he added.

However, Piers Harding-Rolls, an analyst with Screen Digest, said the good times would not last forever.

"At the moment, there is something of a gold rush and - over time - many of these firms are going to be weeded out," he told the BBC.

"The opening of these channels and the development of direct channels to the consumer is making these markets considerably cheaper.

"But, as the consumer expectation of games experience goes up and games become more refined, development costs will rise and it's a safe bet that many of the games currently on the market won't be financially successful," he added.

Tiga's report highlighted the rise of of advertising in video games as developers look for other ways to increase revenue streams.

A third of UK developers already incorporate in-game advertising into their games, while almost half of those who currently do not are looking to do so in the future.

Advertising in games has not proved popular with gamers in the past.

While replication of real-world environments did not cause too many problems - such as billboard hoardings surrounding a football pitch in titles such as EA's FIFA 10 - dynamic adverts that monitor a players' habits and then create targeted adverts did not go down well.

The licence agreement for the 2006 release of EA's Battlefield 2142 stated that players would have to agree to let the firms in-game advertising associates, IGA Worldwide, study you, saying the game would monitor "advertising data" to optimise which adverts would be delivered to the player.

Adverts 'a bonus'

The public backlash to Battlefield 2142 was somewhat predictable, with forum posts labelling it "spyware" and forcing EA into damage limitation.

The company eventually released a statement saying the software did not access any files which were not directly related to the game and did not capture personal data such as cookies, account login details, or surfing history.

Today, the adverts - on the whole - tend to be more benign, with billboards and graphics within the game.

"Adverts are a bonus for the games industry, but are very much a secondary business model," Mr Harding-Rolls said.

"Its nicely incremental and we expect it to grow, but it is not that significant at present."

Tiga's report did sound a note of warning, however, saying UK games developers were now at a significant disadvantage due to the lack of tax breaks being offered by the government, unlike in Canada and France.

Canada, in particular, is offering significant tax breaks - in some cases up to 40% - to encourage growth in the country's gaming sector.

The UK Chancellor, George Osborne, ruled out tax breaks in his emergency budget, although Culture Minister Ed Vaizey has kept the door open to further negotiations on the subject.